As we wrap up the month of May, here’s the tally: The Dow gained 14
points for the month, the S&P 500 gained 29 points, and the Nasdaq
was the winner with a gain of 173. The 10-year Treasury was flat. Oil
added $3 a barrel. Gold lost $78 an ounce.

Consumer spending
increased 1% in April to mark the biggest gain in almost seven years,
as Americans splurged on new cars and trucks. Higher gas prices also
contributed. Inflation-adjusted spending rose a smaller but still
healthy 0.6% in April.

The April spending figure was the biggest
one-month climb since a 1.3 percent increase in August 2009. The
Commerce Department also reported incomes were up 0.4 percent, matching
the March gain.

Wages and salaries, the most important component of
incomes, gained 0.5 percent. An inflation gauge closely watched by the
Federal Reserve showed prices are up 1.1 percent over the past year.
Core inflation, which excludes volatile food and energy costs, rose 1.6
percent.

Both measures are still below the Fed’s target of 2 percent
annual price increases, but they have ticked up in recent months. The
increased spending on gasoline due to higher prices coincided with a
reduction in the savings rate, as April spending outstripped income.
Higher gas prices skew the data because you’re not buying more, just
spending more.

Consumers’ confidence
fell in May to the lowest level since late 2015 as Americans turned
slightly more pessimistic about overall business conditions and the jobs
market a survey shows. The consumer confidence index dropped to 92.6
from a revised 94.7 in April; that’s the lowest level since November and
well below the post-recession high of 103.8 set in early 2015.

The
present situation index, a measure of current conditions, slid from
117.1 to 112.9. The future expectations index declined to 79 from 79.7.
That’s the weakest reading in almost two and half years.

Indications on the fundamental health of the consumer are suddenly building rapidly and include solid gains for home prices. House prices
jumped 0.9% in March. Prices in the S&P/Case-Shiller 20-City Index
were 5.4% higher than a year ago, the same pace as in February.

Limited
inventory is driving the outsize price gains. The number of homes
currently on the market is less than two percent of the number of
households in the US. That’s the lowest since the mid-1980s. House
prices in the Phoenix area rose 0.3% in April and are up 5.6% in the
past 12 months.

Euro area inflation stayed
negative in May, according to a flash estimate from Eurostat, edging up
to negative-0.1% from negative-0.2% the month before. The latest figure
is a far cry from the 2% inflation target set by the ECB, and comes
after the central bank announced further stimulus measures in March in a
bid to stimulate the bloc’s economy. Meanwhile, the Eurozone’s jobless
rate came in flat at 10.2% for April, as unemployment dropped by 63,000.

In a letter written to
its European and IMF creditors, Greece said it cannot implement some of
the extra changes sought in exchange for fresh bailout loans, including
banking regulation, sales of bad loans, pension reforms and
privatization. The disagreement could further delay the disbursement of
bailout funds which Athens badly needs to pay off IMF loans in June, and
bonds of the ECB maturing in July.

First-quarter earnings season
is close to over, and the numbers are gloomy. Overall profit for
S&P 500 companies was the weakest in 6 1/2 years. The financial
sector showed a double-digit percentage decline, while utilities saw
earnings fall into the red. A full 98.4% of S&P 500 companies have
now reported, and profit measured by earnings per share is down 7% from a
year ago, according to FactSet. On the heels of a 3.2% decline in the
fourth quarter, that marks the fourth straight quarter of year-over-year
earnings declines, and it was the biggest drop since the third quarter
of 2009.

Global markets appear to
be “well-prepared” for a summer interest rate hike, according to St.
Louis Fed President James Bullard, although he didn’t specify a date for
the policy move. “As far as a rate hike in June or July, I would prefer
to reserve judgment,” he told a news conference yesterday in Seoul.
Bullard added that a rebound in U.S. GDP seems to be materializing in
the second quarter, and described last week’s revised first quarter
growth figure of 0.8% as “encouraging” but “still weak.”

In addition to economic data, the Fed will be looking for clues on the Brexit;
a referendum vote is scheduled for one week after the June FOMC
meeting. The pound dropped after a new poll showed a jump in support for
the campaign to take Britain out of the European Union. A new survey
showed 45 percent of respondents supported leaving, 42 percent for
‘Remain’ and 13 percent were undecided.

A different poll, by ORB for the
Daily Telegraph newspaper this week showed 51 percent of definite
voters surveyed supported remaining in the bloc, and 46 percent wanted
to leave, a narrower lead for the remain camp than in ORB’s previous
poll. Whatever the outcome, the drop in the pound shows just how
sensitive investors are to shifts in public opinion, highlighting the
risk of more volatility with just over three weeks of the campaign left
to go.

Last Thursday,
oil prices popped a few cents above $50 a barrel. US crude output fell
in March for a sixth month in a row, slipping to 9.12 million barrels
per day from 9.13 million bpd in February. Add in supply disruptions in
Nigeria, Venezuela, and Canada (due to the wildfires); combined with the
start of the summer driving season and it results in about a 9%
increase in oil prices for the month of May. Will the higher prices
hold?

Iraq will supply 5 million barrels of extra crude to its partners in
June, according to industry sources, joining other Middle East producers
by lifting market share ahead of an OPEC meeting this week. Saudi
Arabia, Kuwait, Iran and the United Arab Emirates also plan to raise
supplies in the third quarter. Despite the news, OPEC will continue to
discuss issues including an output freeze when the group gathers June 2.

Saudi Arabia is considering selling as much as $15 billion of bonds
this year in what would be the country’s first foray into international
capital markets. Qatar last week attracted $23 billion in orders for its
$9 billion sale, the biggest-ever from the Middle East. And while the
bond sales may provide some breathing room, the sales are just a stopgap
measure to cover budget deficits, meaning OPEC producers will need to
pump more.

Great Plains Energy
is buying rival Westar for about $8.6 billion, creating one large power
provider in Kansas and Missouri with more than 1.5 million customers.
Great Plains Energy owns Kansas City Power & Light, which provides
power in Kansas and Missouri. Westar’s customers are in Kansas.

Jazz Pharmaceuticals
has agreed to buy Celator Pharmaceuticals, which makes a treatment for a
form of leukemia, for $1.5 billion in cash; that represents a 73%
premium to Friday’s close.

Nearly 40,000 striking Verizon employees will
return to work on Wednesday after reaching a tentative contract
agreement that includes 1,300 new call center jobs, nearly 11% in raises
over four years and the first contract for Verizon Wireless workers.
The pact, announced by the Communications Workers of America union,
stands to end a six-and-a-half-week work stoppage and one of the longest
U.S. strikes in recent years.

The Supreme Court
wants no part of a dispute involving Donald Trump’s namesake casino.
The justices turned away an appeal from a union representing more than
1,000 workers at the Trump Taj Mahal in Atlantic City, New Jersey. The
workers said they were improperly stripped of pension and health
benefits when the casino’s parent company, Trump Entertainment Resorts,
sought bankruptcy protection in 2014. Trump no longer owns the casino or
the entertainment company. Trump Entertainment is now a subsidiary of
billionaire Carl Icahn’s Icahn Enterprises LP.

Cracking down on rising online
racism and the recent wave of radicalization, Google, Facebook, Twitter
and Microsoft have signed up for new EU rules on taking down hateful
content posted on their platforms. The “code of conduct” will require
the companies to “review the majority” of flagged speech within 24 hours
– and remove it, if necessary – and even develop “counter narratives”
to combat the growing problem.

The U.S. auto industry’s home
state of Michigan is preparing for the advent of self-driving cars by
pushing legislation to allow for public sales and operation of the
vehicles. The move is a significant expansion beyond existing state laws
which currently sanction such cars for testing only.

Volkswagen
saw its net profit fall 19 percent in the first three months of the
year, but still posted a profit despite a costly scandal over cars
rigged to cheat on diesel emissions tests. First quarter profits fell to
$2.6 billion. Revenue fell 3.4 percent to 50.96 billion euros due in
part to shifts in currency exchange rates. Still, the company reported
it had bulked up on its cash reserves and said it was well-funded to
deal with the effects of the scandal, which include costs for recalls,
fines and lawsuits.

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